pandora bmi

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OORIGINAL UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK x BROADCAST MUSIC, INC., USDC DOCL:\U::\T ELECTRO\IC \tLY FILED DOC#: DATE FILED: )J/)9//3 I Pet it iorler, 13 C 4037 (LLS) - against Related to 64 Civ. 3787 (LLS) OPINION & ORDER PANDORA MEDIA, INC., SONY/ATV MUSIC PUBLISHING LLC, EMI MUSIC PUBLISHING, UNIVERSAL MUSIC PUBLISHING, INC. Intervenors. -x This case grows out of a series of "withdrawals u of digital s, by music publishers affiliated with Broadcast Music Inc ("BMIU) from Pandora Media, Inc. ("Pandora U ) and other "New Media Services." BMI's petition seeks an order exercising the Court's rate setting authority under article XIV of the BMI Consent Dec , sett e music license terms and fees after giving effect to the withdrawals, for performances of the remainder of the compositions in BMI's ory. 1 United States v. Broadcast Mus c Trade Cas. (CCH) 71,941 (S.D.N.Y. 1966), Trade Cas. (CCH) , 71,378 (S.D.N.Y. 1994). 1 - Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 1 of 14

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Page 1: Pandora BMI

OORIGINAL

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK

x BROADCAST MUSIC, INC.,

USDC SD~Y DOCL:\U::\T ELECTRO\IC \tLY FILED DOC#:

--------~~~---DATE FILED: )J/)9//3

I

Pet it iorler, 13 C 4037 (LLS)

- against Related to 64 Civ. 3787 (LLS)

OPINION & ORDER

PANDORA MEDIA, INC.,

SONY/ATV MUSIC PUBLISHING LLC, EMI MUSIC PUBLISHING, UNIVERSAL MUSIC PUBLISHING, INC.

Intervenors.

-x

This case grows out of a series of "withdrawals u of digital

s, by music publishers affiliated with Broadcast Music Inc

("BMIU) from Pandora Media, Inc. ("Pandora U ) and other "New

Media Services." BMI's petition seeks an order exercising the

Court's rate setting authority under article XIV of the BMI

Consent Dec , sett e music license terms and fees

after giving effect to the withdrawals, for performances of the

remainder of the compositions in BMI's ory.

1 United States v. Broadcast Mus c Trade Cas. (CCH) ~ 71,941 (S.D.N.Y. 1966), Trade Cas. (CCH) , 71,378 (S.D.N.Y. 1994).

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Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 1 of 14

Page 2: Pandora BMI

Moving for partial summary judgment, Pandora argues that

the withdrawals are ineffectual, because the antitrust consent

decree which BMI s requires BMI to of r a license

to Pandora to perform all of the compositions in the BMI

repertory as of January I, 2013, de te the fact that certain

music publishers have by agreement wi BMI withdrawn from BMI

the right to license their composit to so called "New a

Services u such as

However, the BMI Consent Decree res BMI to offer

a license to perform all of the compositions in its

When BMI no longer is authorized by music publisher

copyright holders to license their compositions to Pandora and

New Media Services, those composit are no longer el le

for inclusion in BMI's ory. BMI can no longer license

theIT. to Pandora or any other applicant.

ngly, Pandora's motion for summary judgment is

denied.

BACKGROUND

BMI is a non-profit performing rights organization ("PRO")

that licenses non-exclusive rights of ic ormance to a

variety of music users on behalf of affiliates who are the music

compositions' copyright holders. BMI's affiliates se

approximately 600,000 composers, songwriters and music

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Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 2 of 14

Page 3: Pandora BMI

publ ishers, and BMI' s consists mate 7.5

mill on musi compositions.

Pandora lS a streaming internet o service that plays

music compositions Ii directly ir copyright

holders, or through BMI and other PROs.

A. THE BMI CONSENT DECREE

BMI's ability to license public performance r s of

ts musical repertory is governed by the Consent Decree settl ng

t santi trus sui t brought the United States. An amendment

to the BMI Consent Decree e ishes s Court as a "rate

court, If which sets fees for licenses when BMI and applicants

cannot agree on a reasonable fee. BMI Consent Decree Art. XIII.

The Decree al so s cert condi tions and requirements on

BMI's issuance of licenses.

Sect on VTI(B) of the BMI Consent Decree states in relevant

"De shall, upon t request of any unl censed

aster, license the r s publi to perform l S

ory by broadcasting on either a per program or per

programming od basis, at defendant's option. 1f

Section IX(C) of the BMI Consent Decree states:

De endant shal not, connection with any ffer to license it the public performance of musi compositions by music users other than ste2..-S I re use to offer a license at a price or prices to be fixed by defendant with t~e consent of the copyr etor for the performance of such specific (i.e., per

- 3

Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 3 of 14

Page 4: Pandora BMI

compositions, use which 1 be sted by ::.1:1e prospect licensee.

Although not icitly mentioned in the BMI Consent

Decree, "Traditionally, the BMI's license of choice has been a

'blanket license,' a license that s the licensee access to

3MI's entire ory in exchange for an annual United

States v. Broadcast Music

2001) . As defined by Section II(C) of the BMI Consent Decree,

\\'!Jefendant's ory' means those compositions, the right of

public of which defendant has or fter shall

the right to 1 icense or icense." BMI Consent Decree

Art. II (C) .

Section VIII des: "Def 11 not enter into,

ze as valid or perform any performing rights license

agreement whi shall result in disc nating in rates or terms

between licensees simil situated."

Section XIV (A) states:

ect to all provisions of this Final defendant shall, within nlne (90) days of its receipt of a written application from an applicant for a license for the right of public performance of any, some or all of the compositions in defendant's repertory, advise the applicant in writing of the fee which it deems reasonable for the license requested.

If BMI and an applicant cannot agree on a 1 icense fee,

either may apply to s Court for the rmination of a

reasonable license fee. Id.

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Page 5: Pandora BMI

B. DEALINGS BETWEEN BMI & PANDORA

On June 30, 2005, Pandora and EMI entered into a standard

01 t form license agreement which allowed Pandora to stream

all music compositions in EMI's repertory. Kennedy Decl. ~~

8 9. In 2012, Pandora determined that the terms of this license

were no lo~ger appropriate fo~ its iness, and terminated it

effective December 31, 2012. Id. ~ 9. After the parties failed

to iate a new type of license, Pandora filed a written

cation with EMI for a f year bl license inning

January I, 2013, id., which it may later wholly or partly

withdrawn. While the parties were in iations, EMI fi ed

its pet tion with the Court for ion of reasonable

license fees on June 13, 2013 . No.1). EMI and Pandora

have negot ed erim icense fees to be in ef from

January I, 2013 until the parties negotiate an agreed ~ate or

the Court issues a final setting license terms and fees.

EMI Petition ~ 55.

C. PUBLISHER WITHDRAWALS OF NEW MEDIA LICENSING RIGHTS FROM BMI

Effective I, 2013, EMI allowed its affiliate

publishers (the intervenors and others) to elect D tal Rights

Withdrawal and modi their affil ion agreements to excl

EMI's right to license "New Media Transmissions by New Media

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Services,u 2 hereinafter re to as "New Media licensi

rights." Guidelines gital s thdrawal

1 sn), available at ht ://www.bmi.

The Digital Rights Withdrawal Addendum to BM-'s publisher affiliation provides the following definitions:

1. Definitions.

a. A "New Media Transmission" shall mean:

1. a digital audio transmission that, addit to requiring a public performance license, also

res the music user to comply with the license requirements 17 U.S.C. § 114, § 115 and/or § 106(1);

11. a gital transmission of a music video or user­uploaded video (i.e., a vi uploaded to the service by the end-user) that, in addition to requiring a public license, also

res that the ce, in order to offer the music video or user-uploaded vi on or via the

ce, obtain a license directly from the owner or administrator of the ghts the musical composition(s) embodied therein for s other than the right of public performance (e.g., synchronization or mechanical rights) and/or

111. a digital transmission made from a tal music file either (a) uploaded by an end-user to the server and/or (b) matched from a file on end­user's or device to a digita music file on the server (such server, in either case, often re to as either the "cloud" or a "locker").

b. "New Media ServiceD shall mean a standa one service by which New Media Transmissions of musical compositions are made available or accessible (i) marily by means of the Internet, a wireless mobile telecommunications network, and/or acomputer network and (ii) to the public, whether or not, in

- 6

Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 6 of 14

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com/entry/guidel s for_digit _rights_withdrawal (As of

September 16 1 2013). The modification was set in an

addendum which states:

This addendum ("Addendum") to the publisher affiliation will confirm the understanding of BMI and

("Publisher") with respect to Publi IS sire to withdraw the right to license certain digital transmissions (the "New Media Transmissions" as defined below) of musical works licensed to BMI (the "Publisher Works" as defined below) .

DiMona Decl' l Ex. G I D ital Rights Withdrawal Addendum l p.

The ies (BMI and publisher) Accepted and Agreed:

For the avoi of doubt I as of the Effective Date of Withdrawal I Publisher shall have the exclusive right to license New Media Transmissions of Identified Interests and Corresponding Interests in Publisher Repertoire Relatl

Repertoire and Administered Repertoire and BMI shall no longer have any right to license New Media Transmissions of Identified Interests and Corresponding Interests repertoire for the nder of Term.

l

Id. at p. 3.

BMI public announced:

s withdrawal does not affect any of BMI I s other licensing act ies. It does not affect BMI I S right to license traditional broadcast I e and satellite transmissions l or their related new media transmissions. BMI cont s to have the right to license I other dig al uses I even for publishers that have withdrawn from BMI the I ted digital rights defined above for new media services.

for a subscription feel other fee or i and whether or not such offering includes exposure to advertisements before during and/or after thel

transmission of such compositions .

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Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 7 of 14

Page 8: Pandora BMI

Scope of Digital Rights Withdrawal, available at

http://www.bmi.com/licensing/entry/drw (as of July

2013) Composit lic to BMI from affiliates other

t~an t withdrawing ishers are unaf cted,

"Cata"ogs that are subject to Di ta Rights Withdrawal

wi : be restored to the BMI re if they are acquired

or newly admi st by an Affiliate that has not e ected

igital Rights Withdrawal." de:ines p. 2.

In September 2012, Sony/EMI 3 became the first publisher to

announce its planned withdrawal of New Media licensing rights

from BMI. 's Motion p. 9. Pandora negotiated direct

licenses with Sony/EMI for the year 2013. Kennedy Decl. ~ 10.

On November I, 2013, filed this motion for ia:

summary judgment. Pandora seeks a determination that, as the

compositions are held in BMI's , BMI must offer to

Pandora without to publishers' ative withdrawals

of BMI's right to do so.

Sony/EMI and fellow publisher Universal Music Publi

Group's motions to intervene in t s case were granted on

November 4, 2013 (Dkt. No. 28).

3"Sony/EMI" refers to the corrbined catalogs of Sony and EMIj Sony/ATV became the administrator of EMI's catalog in July 2012.

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Page 9: Pandora BMI

DISCUSSION

Pandora argues the publisher withdrawals do not affect

the scope of its license, and points to Sections VIII(A)

XIV{A) of the BMI Consent Decree whi ire BMI to grant a

continuing license to perform "all of the compositions in the

defendant's repertoryH rate proceedings or iations.

The BMI Consent Decree res t all compositions in the BMI

be offered to all applicants.

Under Section XIV of the BMI Consent Decree, when an

applicant requests a license for "any, some or all of the

compositions in defendant's repertory," BMI must grant a license

for performance of the requested composit which may range

from "anyH (a piece" license) to "all" (a blanket license).

Under the BMI Consent Decree, these opt ions are open to

icants with fees that do not discriminate betweenl

icants simil situated. By plac a composition in the

BMI repertory, the affiliate routinely authorizes its inclusion

in blanket licenses of BMI's whole to all applicants.

But if the withdrawal of its authority to do so by some

affi iates with to compositions for which they own or

ladmi ster the ghts is within those affiliateS ghts,

BMI cannot offer New Media licensing rights for those

compositions to New Media app icants, including f BMI

cannot offer those compositions to New Media applicants, their

9 ­

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Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 9 of 14

Page 10: Pandora BMI

avail lity does not meet the standards of the BMI Consent

:Jecree, and t cannot be held in BMI's repertory. Since they

are not in BMI's repertory, BMI cannot deal in or license those

compositions to anyone.

As copyright holders, the publishers may divide their

copyrights pursuant to Section 106 of the Copyright Act, 17

U.S.C. § 106, which provides:

Subject to sections 107 through 122, the owner of copyr under this title has the exclusive rights to do and to authorize any of the lowing:

(3) to distribute copies or phonorecords of the copyr ed work to the public by sale or other transfer of ownership, or by rental, lease, or lendingi

(4) in the case of literary, musical, dramatic, choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform t copyrighted work publiclYi

(5 ) in the case sound recordings, to perform the work publicly by means of a digital oed

The publ ishers are priviI to license, or not license, the

performance of their compositions as see fit. In the

exercise of that right the publi have with BMI to

withdraw their New Media performance licensing rights from

Pandora and New Media Services. is well within their power

as copyright holders. See United States v. Am Soc' of

A.uthors & Publ ishers In re ication of Yahoo!

- 10 ­

Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 10 of 14

Page 11: Pandora BMI

Inc. 627 F.3d 64, 71 (2d Cir. 2010) ("The Copyright Act

confers upon t owner of a copyright a bundle of screte

exclus ghts, which may be ';:ransfe or retained

ely by the copyright owner. If) (citing and ing New

York Times Co. v. Tasini, 533 U.S. 483 (2001)) Buffalo Broad.

Co . v. Am. Soc' ers Authors & Publishers, 744 F. 2d

917, 920 (2d Cir. 1984) ("The Ac~ specifical accords the

copyright owner the right to authorize o~hers to use the various

rights recognized by the Act, including the performing right and

the reproduction right, and to convey t se rights ely." )

(citing Copyright Act). Thus, the copyright holders have the

r ~o withdraw from BMI i~s authority ~o license the

performance of their compositions by the New Media Services.

It is the BMI Consent Decree the antitrust law) which

rest c~ BMI ng In its yory compositions which

it can no longer offer to the New Media Services, who were up

until recent accepted as timate, qualified, licensed and

performing those works. BMI's repertory consists of

composi tions whose performance BMI "has the right to license or

icense" i it "shal upon the request of any unlicensed

broadcaster, license the rights publicly to perform its

ory" . BMI Consent Decree Arts. II(C) i VII{B). When

ions of t ght are withdrawn, the affected compositions

- 11 ­

Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 11 of 14

Page 12: Pandora BMI

ac

are no longer eligible membership in BMI's rtory, and it

cannot include them in a blanket license or license them at all.

BMI contends that its long-standing inability to license

the "grand right" (the right of public dramatic performance)

shows that t lS no universal to licenses to perform

all the compositions in its repertory. BMI Brief pp. 6 9. But

BMI has never offered grand er s. All applicants are

treated equally: BMI cannot licenses for grand theater

performances to anybody. They are a commodi in which BMI does

not deal. In contrast, New Media I icensing rights have until

recently been of to any and 1 applicants; they have been

by, licensed to and exercised by the New Media

Services, and (exc for those now withdrawn by some publishers

from New Media applicants) the affected compositions are still

offered by BMI to all applicants other than New ~edia. Indeed,

the withdrawal guidelines themselves recognize that when a

withdrawing publisher's catalog is transferred to another

affiliate who has not withdrawn their compositions from New

Media Services, compositions in the transferred catalog are

"restored to the BMI re." Guidel s p. 2. Thus, the

"grand r s" example has no analog in, and nothing to do with

the ssues in this case.

It is sirr.ilarly imrr.aterial that BMI cannot offer certain

synchronization rights (the to license musical

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Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 12 of 14

Page 13: Pandora BMI

composi t ions in conj unct with visual images) or rights for

jukebox licenses and noncommerci broadcasters, which are

statutorily excluded from BMI's purview because of t operation

the ght Act, 17 U.S.C. §§ 116, 118. The publishers are

free to license these rights to all music users. But BMI s

not of , nor has it ever offered, these rights to anybody.

BMI and the intervenors argue nothing in the BMI

Consent Decree prevents BMI from agree not to serve

particular customers. That puts matters backwards. Nothing in

the Consent Decree settling this antitrust case can be read to

allow one with BMI's market power to re to deal th certain

of its icants. The copyright law necessarily gives that

privil to the intervenors, but BMI cannot combine with them

by holding its ory compositions that come th an

invitation to a boycott attached. 4

The Department of Justice has submitted its views, which ore creation of any dable inconsistency between s

decision and the ier one of the Honorable se Cote, U.S.D.J., I ition of Pandora Media Inc., No. 12 Civ. 8035 (DLC) , slip. op. (S.D.N.Y. . 17, 2013). The inconsistency is just a difference of view of the power of the application of Section 106 and the copyright holders' rights under the Copyright Law, and will be resolved the Court of

Is for the Second Circuit or decree amendment procedures, or managed commercially.

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CONCLUSION

Pandora's motion is ed. relevant compositions are

not within B~I's ory, and it lacks the power to license

them to any applicant, lc.ding Pandora.

Nothing in this opinion af ts t right of licensees to

cont to perform withdrawn compositions under sently

existing licenses. They were legal when made, and the rights

they ed are not to be altered retroact y. As far as

this ru.L is concerned, t cont according to their terms

until ir expiration.

So ordered.

Dated: New York, New York December 18, 2013

t",."j I.. ~t...J;,. LOUIS L. STANTON

U.S.D.J.

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Case 1:13-cv-04037-LLS Document 74 Filed 12/19/13 Page 14 of 14